2010: Tesla, Toyota to build electric cars at NUMMI plant

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The Tesla Model S sedan on display during a press conference Thursday May 20, 2010 at Tesla Motors headquarters in Palo Alto. The high-end electric car manufacturer announced they will build their cars at the recently closed NUMMI factory in Fremont, not Orange County as originally announced, and on top of that, they'll enter into a partnership of some sort with Toyota. (Photo by Patrick Tehan/Mercury News)

From left, California Governor Arnold Schwarzenegger , Akio Toyoda, the president of Toyota and Tesla CEO and co-founder Elon Musk pose for photos during a press conference Thursday May 20, 2010 at Tesla Motors headquarters in Palo Alto. The high-end electric car manufacturer announced they will build their cars at the recently closed NUMMI factory in Fremont, not Orange County as originally announced, and on top of that, they'll enter into a partnership of some sort with Toyota. (Photo by Patrick Tehan/Mercury News)

In a stunning deal, Tesla Motors announced late Thursday that it is teaming up with Toyota to build its all-electric Model S sedan at the recently shuttered NUMMI plant in Fremont, creating more than 1,000 new jobs.

The pact, put together in utter secrecy, immediately injects new life into an auto plant once left for dead, is a jolt of positive news for beleaguered Toyota and elevates Silicon Valley’s role at the heart of the emerging electric car industry.

Under the agreement, Toyota, the world’s largest automaker, will invest $50 million in Tesla, which will buy the NUMMI plant for an undisclosed sum. The joint venture was unveiled by Akio Toyoda, Toyota’s CEO, who flew in from Japan for the announcement, Tesla CEO Elon Musk and Gov. Arnold Schwarzenegger at a heavily attended 5 p.m. news conference at Tesla’s Palo Alto headquarters.

The partnership between Tesla and Toyota was first hatched six weeks ago, when Toyoda visited Musk at his Southern California home. The two went for a 30-minute drive in a Tesla Roadster, a two-seat sports car that is the only all-electric vehicle on the road today.

“I was impressed by Tesla’s technology and impressed by the company’s energy,” said Toyoda, who noted that Toyota itself, founded by his grandfather, was once a startup. “I felt the wind of the future.”

Musk said the two men hit it off on the drive and had an instant personal connection that quickly led to talks of some kind of partnership.

“We drove around the Westwood area of Los Angeles talking about random things,” said Musk. “He’s a good driver. He put it through its paces.”

Tesla will use the former New United Motor Manufacturing Inc. plant to begin production of the Model S, a sedan that can seat five adults and two children and has a range of 300 miles. Once it reaches full production at the NUMMI plant, Tesla expects to produce 20,000 electric vehicles each year, which will sell for $50,000.

But the Model S would occupy only a small part of the NUMMI plant, leaving room for Tesla and Toyota to manufacture other models of electric cars there.

“Long term, we think we could create 10,000 jobs, half from Tesla and half from our suppliers,” Musk said.

The news was hailed by Sen. Dianne Feinstein, D-Calif., who wrote a letter to Toyota last summer urging the company to look at a possible partnership with Tesla.

“I congratulate Tesla and Toyota today,” Feinstein said in a prepared statement. “As one who has followed NUMMI since its inception, I was very dismayed and disheartened by its closure in April. I celebrate the new life of opportunity which is inherent in this new venture.”

Some industry analysts also endorsed the announcement.

“This seems like a good deal for both parties, especially Toyota, from being able to avoid the political fallout from shutting NUMMI down to being able to offer a new electric vehicle with just a low initial investment cost,” said Jeremy Anwyl, CEO of Edmunds.com.

He said his only concern was that the Model S that will be made at NUMMI would arrive years after competing electric cars, such as the Nissan Leaf and Chevrolet Volt, hit dealer showrooms later this year.

“Tesla’s credibility has been greatly enhanced thanks to this partnership with Toyota,” said John O’Dell, senior editor of GreenCarAdvisor.com. “Many had doubted the company’s ability to deliver on all its promises, but Toyota must have conducted substantial due diligence before making this investment.”

City Council members from Fremont, where NUMMI is located, were thrilled and raced across the bay to attend the news conference.

Eric Kim, an analyst with the consulting firm AutoPacific, called the partnership a good public relations move for Toyota, which has seen its reputation battered in recent months over safety problems in some of its vehicles. However, he was perplexed at the Japanese company’s reasons for being involved with Tesla, since Toyota is expected to have its own all-electric car on the market in two or three years.

“I really wouldn’t have thought that Toyota would have a lot to gain from Tesla,” he said. “I had not anticipated this.”

Among those not cheering were officials in the city of Downey in Los Angeles County. For months, they had been working with Tesla in hopes that the automaker would locate its factory there. The Downey City Council was hours away from voting on the terms of a lease for Tesla. Tesla executives finally told Downey city officials that they were going to Fremont instead on Thursday afternoon, catching staffers who have spent hundreds of hours on the nearly final deal completely by surprise.

“We’re shocked, appalled and disgusted,” said Downey Councilman Mario Guerra. “We have been dealing in good faith with Tesla and feel stabbed in the back.”

The announcement is a remarkable turnaround for the NUMMI plant, which Musk hopes to make the “cleanest and greenest” auto manufacturing plant in the world.

The 50-50 joint venture between GM and Toyota, struck in 1983, was seen as a boost for both carmakers. Toyota got a car-making beachhead in the United States and GM got a chance to learn Japanese manufacturing techniques.

But over time the manufacturing operation became something both GM and Toyota began to view as an unneeded expense, especially as the world tumbled into the recent recession, automobile sales began to seriously slide and GM wound up in bankruptcy.

The factory was doomed last summer after first General Motors and then Toyota announced they were severing ties with the facility. When a bright red Toyota Corolla rolled off the assembly line at 9:21 a.m. April 2, the last of 7.7 million vehicles produced at the plant, it ended more than 25 years of production at the last auto plant west of the Mississippi.

The plant appears to have gotten this new hope with the talks between Tesla and Toyota. The Downey plant had been planned to make the Model S, but a partnership with Toyota made the giant NUMMI plant more attractive since it gives the two companies room to expand.

Tesla, which was incorporated in 2003, has built its business model and future on the green-technology revolution sweeping the country.

Devoted to making all-electric cars and related vehicle components, the Palo Alto company began selling its first vehicle, the sporty Roadster, in 2008. The $100,000 car immediately drew the auto industry’s attention with its advertised ability to hit 60 mph from a stop in just four seconds and a between-charge cruising range of more than 200 miles, and attracted a host of high-profile buyers like Schwarzenegger and actors George Clooney and Leonardo DiCaprio.

“We love our cars here in California,” said Schwarzenegger, who used the news conference to talk about how California’s strict environmental policies are driving innovation. “But we also love our environment, our coastline, our ocean, our sky. … I don’t have to tell you how much this means to California, where we have 12.5 percent unemployment.”

Incorporated: 2003Headquarters: Palo AltoCEO: Elon MuskBusiness: Sales of all-electric vehicles and related components. It sold its first car, the Roadster, in 2008Employees: 514 as of end of last yearTotal revenue: $108.2 million since its inception through Sept. 30 last yearTotal losses: $236.4 million since inception through Sept. 30 last year

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